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| Today's Commentary (Short Term Outlook) | ||
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Jobs, jobs, jobs Stocks seemed to climb a wall of worry yesterday as they were up despite raised estimates on the number of jobs being lost in February. Volume was light but the Dow still managed an impressive 47-point gain. For the TSP, the C-fund was up 0.38%, the S-fund gained 0.24%, and the I-fund lost 0.62% as it can't seem to keep up with the late movements in U.S. stocks. The F-fund was up 0.06%.
 Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Most of the indices were modestly higher yesterday as volume remained light in front of this morning's jobs report. Consensus estimates for this morning's jobs report were cut sharply yesterday. They had expected 20,000 jobs lost in February but that has been updated to a loss of 63,000 jobs. They also expect an unemployment rate of 9.8%. Briefing.com also lowered their estimate from a loss of 55,000 jobs, all the way down to a loss of 120,000 jobs, and an unemployment rate of 10.0%. They are either bracing us for a very bad report, or they want us to believe the report will be bad so a fair report will be beat estimates, and the market will react positively. Yesterday's late rally was a possible fake out, or perhaps the report's contents were leaked. Either way, it was a little suspicious to see a late rally just before the close on a pre-jobs report Thursday. (Update 8:50 AM: Surprise, surprise! Jobs come in worse than original estimates, but better than the new estimates, and the market futures rally: -36,000 and 9.7%). The TSP Talk Sentiment Survey came in at 51% bulls, 35% bears, for a 1.46 bulls to bears ratio. That is a neutral reading but it's the highest ratio (most bullish) since January. If you follow the Volatility Index at all, you know that it has been moving almost straight down for weeks. It has now moved down in 16 of the last 17 trading sessions, which is a record. Since it is record, we don't have historical comparisons, but SentimenTrader.com gave us some data showing what has happened after the VIX moved down in 13 of the prior 15 days. It is also rare event, but there were 6 occurrences.  Obviously, the following action was less than favorable, but it was a small sample so they loosened the criteria to get more occurrences. Here's what happened after the VIX was down in 12 of the prior 15 days.  Chart provided courtesy of www.sentimentrader.com You can see that the action in the short-term is generally negative compared to a random day; showing the following day is positive only 19% of the time compared to 53% of the time of a random day. Average returns are negative going out 1-month. The uncertainty of the jobs report and the possible reaction leaves with little to talk about. We could sell off a on a bad report, rally on a good report, or do the opposite. All I know is if we see the 20 and or 50-day EMA (1102 - 1104) I may be ready to buy again. But if we get below that, I will stay defensive. Thanks for reading. Have a great weekend! Tom Crowley |
